Introduction
Businesses tend to prioritise securing their rights in their primary jurisdictions of operation, and / or jurisdictions that are strategically advantageous. This applies across all aspects of operation, whether it is incorporation, tax residency or even intellectual property (IP). The challenge with the latter is that some types of IP are jurisdiction-specific. This note discusses briefly the strategic challenges around territorial limitations of trademark protection in India.
Doctrine of Territoriality and trademark squatting
Trademark law follows the 'Doctrine of Territoriality', which protects against unauthorized use of a trademark within the jurisdiction where it is registered, used, or known to the public.
But what happens when that same trademark is used in a jurisdiction where it is not registered, used or known? It might leave the door open for someone else to apply for identical trademarks in jurisdictions where they are not already protected, with the sole intent to sell such the IP (either in the form of the trademark application, or the registration itself) to bonafide owners at a later stage at a higher cost.
This practice is known as trademark squatting, which, in general terms, means hoarding rights in a property over which they do not have any genuine right or claim. In other words, squatting occurs when a person applies for a trademark, already owned by someone else, in a jurisdiction where the original trademark is not registered or used. Usually, the 'squatter' knows of preexisting trademarks, and files such applications intending to sell to genuine owners at a premium later. Typically, the squatter registers the trademark/s of a well-known entity and waits for the entity to enter the local market.
Remedies against squatting
If it is a well-known trademark that has a reputation extending across borders, a Court may issue an injunction against the squatter. Courts may also award damages to the legitimate trademark owners.
If, on the other hand, the trademark is not well-known, or has no cross-border status, these remedies can be difficult to obtain. In such cases, the owner may prefer to negotiate to acquire the trademark, instead of a protracted legal battle with the squatter.
Instances of Trademark Squatting Targeting Prominent Brands
There have been multiple instances of trademark squatting in India that have targeted prominent global brands. For example, after a Burger King trademark surfaced in India, which was not owned by the global brand Burger King Company LLC, the Court, considering the chain's long period of operations, declared 'BURGER KING' a 'well-known' trademark. Similarly, Sony's 2019 India launch of Playstation 5 (PS5) was postponed because a squatter had filed for the 'PS5' trademark, covering goods identical to those under Sony's registration for 'PS4'. After Sony's opposition, the PS5 application was withdrawn.
Strategies to protect against squatting
One strategy, as demonstrated in the Burger King case described above, is to rely on the protections granted to 'well-known' trademarks in India. The Indian Trade Marks Act, 1999 formally acknowledges the concept of well-known trademarks. Courts have also historically recognized and protected well-known trademarks against infringement well before such marks were statutorily recognised. However, such issues typically arise when the genuine trademark proprietor becomes aware of such registrations.
Another strategy that can be employed by businesses intending to enter a jurisdiction in the future, or seeking to protect their rights in a jurisdiction without having any immediate plans of commencing business operations there, is to file for trademark protection on a "proposed to be used" basis. This may require trademark owners to take tactical positions in identifying appropriate jurisdictions, and may entail some risks if jurisdictions are left out. Nevertheless, it becomes easier to defend rights when formal protection already subsists in a jurisdiction.
In a recent case, the Delhi High Court considered issues of prior use by a foreign brand owner. In Volans Uptown LLC vs. Mahendra Jeshabhai Bambhaniya [2024 SCC Online Del 881], the plaintiff company, Volans owned the US trademark for "BOTANIC HEARTH" and a related device mark. It had applied for registration in Canada and India, and was able to demonstrate prior usage and ownership, including the fact that its goods were available in India since 2020. The company sued the defendant for passing off, as it was squatting on its trademarks in India.
The Delhi High Court ruled in favour of Volans considering its prior use as well as the defendant's modus operandi of squatting against popular and reputed trademarks. The Court issued an ex-parte ad interim injunction restraining the defendant from using the trademarks in question or their variations. Pertinently, the Court said that injunctive relief, in a quia timet action, could be granted to forestall an injury 'likely to occur'. For this, it relied on two older decisions, in Jawahar Engineering Co. v. Javahar Engineering Private Ltd. [AIR 1984 Del 166], and Kuldip Singh v. Subhash Chandra Jain [(2000) 2 SCALE 582]. The Volans ruling serves as a significant deterrent against trademark squatting and reinforces the protection of IP rights in the e-commerce sector.
Conclusion
The main take away is that brands with global, cross-border
ambitions, must develop a holistic strategy involving IP and
related protections, preferably well before market entry.
The popularity of brands can rapidly escalate worldwide, in today's interconnected and globalised scenario. Such popularity is possible even without brands selling products directly or actively advertising in a particular jurisdiction. This has naturally led to an increase in trademark squatting, with opportunists seeking to take advantage of vulnerable brand owners, particularly at key stages of business or product development, such as just before a product is entering a new market.
Given this, it is wise to register trademarks in countries of potential future sale, manufacturing, R&D, etc. especially new markets. Equally, it is important to stay informed about IP laws and protections available in different jurisdictions of interest. For well-established brands, protecting trademarks becomes even more vital, requiring vigilance against trademark squatters, and such brand owners should run trademark searches regularly. Another method of protection is to consider proactively filing trademarks on a 'proposed to be used' basis, which may have a deterrent effect on squatters. If formal protections do not already exist, owners may pursue protections on the basis of 'passing off', or relying on well-known status. As a final fall back option, if the costs of litigation outweigh the benefits, it might be prudent to consider a negotiated settlement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.